Park West, a 3,400-bed student housing complex near the Texas A&M University campus in College Station has a resort-style rooftop pool, three gyms and lounges with billiard tables, ping pong and flat screen TV’s.

What it doesn’t have are students -- or rather their parents -- willing or able to pay as much as $1,000 a month to live there. Just over half the beds at the complex, financed largely by tax-exempt municipal bonds, were filled during the last academic year.

About 360-miles (580 kilometers) north in Norman, Oklahoma, a 1,230-bed residence hall at the University of Oklahoma featuring a "blow dry bar and salon," a market with grass-fed local meats, and a cycling studio is just 26 percent leased, according to a securities filing. It opens in August.

“We have seen some projects go through a little bit of stress," said Jessica Matsumori, an analyst at S&P Global Ratings. S&P has rated about 60 privatized municipal student-housing deals, most of them BBB-, the lowest investment grade.

As universities tap outsiders to finance a dormitory arms race while keeping debt off the books, the Texas and Oklahoma projects underscore the risks to investors of overbuilding "luxury" accommodations as students and parents become more cost-conscious.

More Bonds
Municipal bond sales for new student housing projects backed only by rents grew to about $930 million last year, a 45 percent increase from a decade before, according to data compiled by Bloomberg.

Unable to pay operating costs and service $360 million of bonds with project revenue, the non-profit owner of the Texas A&M complex, National Campus and Community Development Corporation, agreed May 17 to give bondholders more control over the project. Texas A&M also agreed to advertise the complex on its campus housing website.

Last week, S&P downgraded $250 million municipal bonds that financed the University of Oklahoma project to BB. Baton Rouge, Louisiana based Provident Resources Group, the non-profit that financed the dorm, attributed weak demand to a “lack of creative marketing strategies" and higher rents than other housing, the ratings company said.

Greg Eden, a former public finance-lawyer at Kutak Rock and president and sole employee of Austin, Texas-based National Campus didn’t return calls seeking comment. Steve Hicks, also a former public-finance attorney and the chief executive officer of Provident, didn’t return calls seeking comment.

National Campus has financed student housing at Florida International University and Drake University it Iowa. It has also issued debt for a hotel and conference center at Texas A&M. Provident owns student housing at Kean University and Montclair State University in New Jersey, Towson University in Maryland, and North Carolina State University.

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